Twitter Spooks Investors with 1Q15 Earnings (Part 3 of 5)
Lack of sophisticated ad measurement tools hurting Twitter
In the first part of this series, we explored Twitter’s (TWTR) revenue growth slowdown that was caused by the underperformance of its direct response ads. Part of the reason for this underperformance is the difficulty that advertisers have in measuring the effectiveness of their ads.
A lack of sophisticated ad measurement tools makes Twitter advertisers doubt the effectiveness of their ads. This is the main reason why Twitter’s cost per ad engagement, or, the ad pricing metric, declined on a quarter-over-quarter basis in 1Q15, as the chart below shows.
Twitter taking steps to improve ad measurement
During the conference call to announce its 1Q15 earnings, Twitter management reported that the company’s acquiring TellApart for $533 million. TellApart should help Twitter enhance its ad targeting and measurement capabilities. Twitter also announced that it’s partnering with Google (GOOG) (GOOGL) to resolve this issue. The company will make use of the suite of programs available through Google DoubleClick to measure the effectiveness of its ads.
Google is focused on enhancing its ad measurement tools. A few months ago, it added the “estimated store visits” metric to its ad measurement tools to help advertisers understand the effectiveness of their ads. For example, this tool will enable a retailer such as Walmart (WMT) to know where its customers saw an ad online before making a purchase in the store.
For its part, Facebook (FB) recently introduced the Conversion Tracking tool. This tool measures the impact that online ads have on in-store purchases, specifically for retailers. During its 1Q15 earnings call, Facebook’s management pointed to Cellbes—a women’s fashion retailer in Europe (EFA). The retailer uses the Conversion Tracking tool to understand how mobile ads drive the telephone sales of its products.
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